Corporation tax just got harder. Here's what changed
From 1 April 2026, HMRC's free online service for filing CT600 corporation tax returns is gone. Permanently. Every limited company in the UK must now use commercial software to file. If you have been using the free service — and thousands of small companies have — you need to switch now.
That is not the only change. Fixed late-filing penalties have doubled. Miss your filing deadline and the financial consequences are immediate and more painful. HMRC is not being subtle about the direction of travel: automate, digitise, or pay more.
Capital allowances have shifted too. The main writing-down allowance rate has dropped from 18% to 14%. For companies with significant plant and machinery expenditure that does not qualify for full expensing, this reduces the annual tax deduction on those assets. The impact compounds over time.
The silver lining: full expensing at 100% continues for main-rate plant and machinery. A new 40% first-year allowance applies to other qualifying expenditure from January 2026. And zero-emission vehicle first-year allowances have been extended to 31 March 2027. If you are timing capital expenditure, the incentives favour green investment.
Corporation tax rates themselves have not changed. The main rate remains 25% for profits above £250,000. The small profits rate of 19% applies below £50,000, with marginal relief in between. But the administrative burden of compliance has increased, and the cost of getting it wrong has gone up.
Transfer pricing rules have been simplified in one respect: UK-to-UK transactions between connected parties are now exempt. The Diverted Profits Tax has been repealed, with its provisions folded into the main CT framework. These are technical changes, but they matter for groups with multiple UK entities.
If you run a limited company, the action items are straightforward: get commercial filing software, review your capital allowance claims under the new WDA rate, and make sure your filing calendar is airtight. The penalty regime is not forgiving.
Stertha Advisory handles corporation tax compliance and planning for companies from startup to scale-up. If the changes have caught you off guard, book a consultation. We will get you sorted.